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New report on ways to ensure affordable insurance through life changes

June 1, 2011

New report on ways to ensure affordable insurance through life changes

University Park, Pa. -- Modifications to current policies could help ensure that health insurance coverage and subsidies provided under the Patient Protection and Affordable Care Act remain stable even through major life changes, according to a new Commonwealth Fund report released on May 19, 2011. At least 34 million people will gain new coverage under the law. The report’s authors say that it will be important to ensure that life changes, such as fluctuations in income and job transitions, don’t cause abrupt changes in people’s health insurance coverage or financial responsibilities for their premiums or care.

“The Affordable Care Act will ensure universal access to affordable coverage and provide a single point of entry for people to qualify for help in paying for health insurance,” said lead author Pamela Farley Short, a professor of health policy and administration at Penn State. “To minimize gaps and churning in health insurance, however, it will be critical that federal and state policymakers implementing the law make sure that it is simple for people to sign up for, pay for, and keep their coverage when their lives change. This will also help reduce administrative costs to federal and state governments.”

According to the report, titled “Realizing Health Reform’s Potential: Maintaining Coverage, Affordability, and Shared Responsibility When Income and Employment Change,” people could experience coverage gaps or changes in financial responsibility for a number of reasons. For example, since premium tax credits are based on income from prior year tax returns, people with income changes might receive too much or too little in subsidy, and then face an unexpected bill or, conversely, become eligible for more subsidy. Recent legislation increased the amount that people would have to pay back if their income rose above their prior year returns.

In order to reduce the potential for gaps and churning in coverage, the authors recommend a series of policy steps that state and federal policymakers could consider to smooth the process for families and to help limit administrative burdens. For example, they recommend making coverage choices valid for one year, instead of requiring that people select new coverage with every life change.

“The promise of the Affordable Care Act is that, for the first time ever, all Americans will have access to affordable, comprehensive health insurance, with far more information about their benefits and out-of-pocket costs,” said Commonwealth Fund President Karen Davis. “However, in order to reach health reform’s full potential, policymakers must take care to implement the law in a way that will take the guesswork and uncertainty out of people’s health insurance decisions.”

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Pamela Farley Short, a professor of health policy and administration at Penn State, was the lead author on a report that recommends ways to ensure affordable health insurance through job and income changes.